Is agribusiness the next frontier for ESG investment?

By Michael Karpathios, Investor Daily

13 September 2021

As investors look for new ways to exercise ESG investing, Packhorse Pastoral Company is betting on agricultural land developing as a stand-alone asset class.

Headed up by Hyperion Asset Management chairman Tim Samway, Packhorse aims to build a $1 billion portfolio of cattle property in the next five years. 

Launched in May, the firm raised $60 million in its first raise and has since purchased its first property, an 8,360-hectare cattle ranch in Queensland.

The business has developed a process-driven method of creating wealth through optimising cattle station assets and deploying widespread rejuvenation of pastoral land.

The company opens its second round of funding this week, seeking to raise $50 million. 

Speaking to InvestorDaily, Mr Samway highlighted the potential for sizable returns for investors as Packhorse’s practices aim to increase the value of the land they invest in.

“Agricultural land has achieved compound growth of about 6 per cent per annum for as far back as you can go,” he stated.

“These soils have been allowed to desertify, and we can improve the soils and actually increase the carrying capacity of the properties, which actually improves the value beyond the 6 per cent.”

Mr Samway also felt that the agribusiness asset gave investors the opportunity to further their returns through the generation of carbon credits.

“In the process of regenerating the soils, you’re essentially sequestering carbon,” said Mr Samway.

“The carbon credit market grew 20 per cent in 2020 to $272 billion so to play a part in this emerging market may well present investors with a significant financial upside.”

According to Mr Samway, this resonated with first-round investors who demonstrated a desire to be part of a fund deploying sizeable carbon capture programs to sell on credits to companies scrambling to meet their carbon requirements as we get closer to 2030.

“The additional revenue generated by on-selling carbon credits, as organisations globally pledge net zero targets, was certainly an appealing aspect of the first fundraise,” he said.

“Emitters in Australia are just deluded in their thinking of how they’re going to reduce their emissions in time to be able to hit a 1.5-degree target by 2030.

“We think that the demand for carbon units is going to go through the roof.”

Packhorse believes they’ve found a gap in the market, but Mr Samway noted the company is keen for competitors, alongside investors, to contribute to the growth of agribusiness as a stand-alone asset class.

“The reality is the Australian total carbon production is in the millions and millions and millions,” he said.

“We need to encourage other people to do it as well. We’re being very open about what we’re going to do here because we’d actually like other people to join us on this journey.”

Mr Samway confirmed that the company will commit to making a liquidity pool for investors through a buy-back each year.

The round of funding will close on 15 November.